‍I. Introduction

As outlined in the text titled “Lessons learned from five years of venture development,” published in March 2024, we have amassed significant data and experience since the inception of Katalysen.

Drawing upon these insights, along with the execution of two “proof-of-concept” transactions during the winter of 2023-2024, Katalysen is now formally introducing a new investment framework to our venture developer platform. We refer to this framework as the Venture Targeter Framework or VTF for brevity, marking Katalysen's entry into a next phase of venture development.

VTF offers a new interface for both traditional investors (referred to as “co-investors”) and more hands-on investors (referred to as “co-developers”) to collaborate on investments into European early-stage innovation, combining cash, expertise, and networks.

The overarching objectives of VTF and phase two of venture development remain consistent with phase one: A) to serve as a convenient platform for investors to access European early-stage innovation, B) to enrich the platform’s portfolio with high-potential early-stage ventures, and C) to foster the development of these ventures towards success through incentivized cash, expertise, and network resources.

VTF is a new tool in our financial toolbox, offering a fresh approach to structuring transactions and facilitating the formation of impactful partnerships. This allows Katalysen to engage with a slightly different type of venture—ones with proven long-term potential hindered by immediate growth barriers. By removing these barriers, value is often created over a relatively short timeframe (months, not years).

II. Implementing lessons learned from five years of venture development‍

Over the past five years (phase one), Katalysen's investments have adhered to the following straightforward structure:

• Identification of a high-potential early-stage innovation venture.
• Formation of a partnership between Katalysen and the venture.
• Direct investment of cash, expertise and network resources into the venture by Katalysen, powered by Katalysen’s in-house team of generalists and specialists.
• Invitation of co-investors and co-developers to invest in the venture on certain occasions.

Lessons learned from following this structure over the last five years can be summarized as follows:

To address the identified challenges while preserving the advantages, we starting to think about new investment frameworks during 2023. The culmination of this effort, informed not only by our own experience but also by input from co-investors and co-developers in our network, is the Venture Targeter Framework, or VTF for short.

Phase two and VTF in short:

1. Emphasis on making fewer, but more carefully structured investments, often focused on removing barriers to growth, particularly in connection with so-called “special situations” (e.g., saving a venture following bankruptcy).
2. Creation of a Special Purpose Vehicle ("SPV") for each investment opportunity.
3. Katalysen facilitates the pooling of cash, expertise, and network into the SPV.
4. Investment by the SPV into the target venture, potentially alongside other third-party co-investors.
5. Short-term focus on the SPV’s role in restructuring and revitalizing the invested venture, with long-term provision of resources necessary for the venture’s growth (clients, investors, advisors, etc.).

On the surface, the difference between phase two and phase one may appear minor, but VTF enables several crucial benefits for Katalysen:

VTF has been successfully tested in two recent transactions, with the aforementioned benefits verified in both.

III. Proof of concept transactions

As of March 2024, Katalysen has successfully executed two transactions using VTF: Venture Targeter 1 (VT1), investing in Swedish biotech venture QuTEM, and Venture Targeter 3 (VT3), investing in German healthtech venture S4DX. The sequential numbering of these transactions offers a clue to our simultaneous involvement in multiple projects.

VT1 was finalized in late November 2023, with a comprehensive case study published on December 15. Here's a summary of VT1:

• Acquisition context: QuTEM, formerly a promising TEM (Transmission Electron Microscopy) service provider, encountered financial difficulties leading to bankruptcy.
• Investment opportunity: Recognizing its potential, a consortium led by Katalysen Ventures and Quatre Lab secured the acquisition from the bankruptcy estate.
• Previous valuation vs. acquisition cost: Previously valued at over SEK 2 billion with an investment from Hitachi Hitech, QuTEM was acquired for a fraction of its peak value – less than SEK 3 million.
• Strategic significance: The low acquisition cost presents a unique opportunity for rapid and substantial value appreciation.
• Katalysen’s contributions included:
  • Structuring and facilitating the re-structuring of QuTEM and investment using VTF (VT1).
  • Securing vital IP rights, essential for QuTEM's future growth.
  • Facilitating investments to sustain the company until positive cash flows were achieved.
  • Successfully negotiating with the bankruptcy judge, presenting a compelling revival plan critical in outbidding other contenders.
• Progress post transaction: Third-party analysts valued QuTEM at 220MSEK. Key talent was retained, and the rejuvenated team is making swift progress in scaling the company following the restart.

VT3 and its investment into German healthtech venture S4DX was completed in March 2024, and as such it is too early to evaluate the venture’s progress following the transaction. However, the following is certain:‍

• Acquisition context: Due to problems related to the ownership structure, S4DX encountered financial difficulties.
• Investment opportunity: Experts in the healthtech sector informed Katalysen Ventures about the potential of S4DX. The uniqueness of theS4DX product, in addition to the company’s impressive list of current clients and current sales pipeline, were noted.  A consortium led by Katalysen Ventures secured and finalised the acquisition by VT3from the liquidator.
• Previous valuation vs. acquisition cost: Due to problems related to the ownership structure, it was possible to acquire S4DX at extremely affordable valuation multiples.
• Strategic significance: The low acquisition cost presents a unique opportunity for rapid and substantial value appreciation.
• Katalysen’s contributions included:
  • Structuring and facilitating the re-structuring of S4DX and investment using VTF (VT3).
  • Engaging vital expertise within the sector with focus on accelerating sales.
  • Securing vital clients and partners, essential for S4DX's future growth.
  • Facilitating investments to sustain the company until positive cashflows are achieved.
  • Successfully negotiating with the liquidator, presenting a compelling revival plan critical in outbidding other contenders.
  • Successfully negotiating with staff and new organization.
• Progress post transaction: Key talent was retained, and the rejuvenated team is making swift progress in scaling the company following the restart. VT3 team is mainly engaged in new sales and partnerships.Already several new clients on board, mere weeks following the restart.

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IV. Looking towards the future

Both VT1 and VT3 focused on ventures with proven abilities to generate value. Both opportunities were brought to our attention by sector experts who had followed the ventures in question for a long time. And, in both transactions, these experts were involved as co-investors and co-developers to actively help remove barriers to growth in the ventures. Through VTF, all the resources needed to unlock the full potential of these ventures were collected and incentivised in collaborative, win-win transactions. With phase two and VTF, a powerful new investment framework has been added to Katalysen’s toolbox and platform of early-stage innovation opportunities, and work continues on evaluating and structuring more transactions using this framework.

As an agile investor, we envision that more financial frameworks and products will be added to our venture developer platform in the future. The following is an illustrative example of what a future phase three may look like:

New opportunities are bound to be revealed as the market cycle progresses, and our goal is to find the best approach given current circumstances – not to stubbornly implement the same framework regardless of market conditions. We look forward towards continuing these collaborate investments with our exceptional network, and we welcome anyone with an interesting venture in mind to contact us, and together explore new opportunities for value creation.